Presidential aspirant pushes dollarization, central bank abolition
Dollarization could be a way out to Argentina’s high inflation and devalued peso.
Daily TribuneDollarization could be a way out to Argentina’s high inflation and devalued peso.
Argentine presidential candidate Javier Milei, a proponent of dollarization, is vowing to scrap the country's central bank to address inflation and peso devaluation.
"Ending inflation is possible, we just have to take the monetary weapon away from politicians," the 52-year-old lawmaker, referring to the central bank, said.
With annual inflation at 113 percent, and a peso that was devalued by 20 percent this month, experts say the lure of Milei's dollarization idea is that many Argentines feel they have nothing to lose.
The United States dollar has long been a refuge for Argentines from pesos which lose value faster than they can spend them. Citizens bypass strict currency controls to buy dollars from a flourishing parallel market and squirrel them away at home in what is often their only viable means of savings.
Argentina pegged the peso to the dollar at a one-to-one convertible rate in the 1990s as a way out of hyperinflationary cycles of up to 3,000 percent.
After a decade, the fixed exchange rate became untenable and in 2001, the government uncoupled the peso from the dollar, leading its value to plummet and causing a run on banks as people's savings were wiped out.
Panic, looting and protests led to 39 deaths in social unrest that followed. A few days after the devaluation, Argentina defaulted on its foreign debt, further deepening its economic and social crisis.
Dollarization involves replacing a currency entirely with the US dollar, which offers a more stable currency, but removes government control of monetary policy — such as setting interest rates or taking measures to target inflation.
In Latin America, Ecuador, El Salvador and Panama have adopted the dollar as their main currency.
WITH AFP
